Class Actions Blocked By Arbitration Agreements

Two recent class action lawsuits in California have provided a reminder that it is always a good idea to read the fine print before signing a contract. The lawsuits were both trying to bring claims under the Telephone Consumer Protection Act (TCPA) in California district courts, rather than in arbitration as laid out by the contracts the consumers had signed. The TCPA puts limits on the types of calls that companies can make to consumers’ cell phones.

In the first case, the plaintiff, Miguel Mendoza, had obtained a payday loan from Speedy Cash. When he failed to repay the debt, Mendoza began receiving calls from Ad Astra on his cell phone. Mendoza alleged that, when he did not answer these calls, Ad Astra left “voicemail messages using a pre-recorded or artificial voice.” Mendoza alleged that this violated the TCPA and so he filed a class action lawsuit in the Central District of California against Ad Astra, despite having signed a contract in which he waived his right to pursue a class action and agreed to settle any claims in arbitration.

The arbitration clause that Mendoza signed covered a wide variety of claims, including “any claim, dispute or controversy between you and us (or related parties) that arises from or relates in any way to this Agreement.”

Mendoza did not dispute the fact that he signed this arbitration agreement, but he did come up with three arguments for why the court should hold the arbitration clause unconscionable. The first is that Ad Astra allegedly lacked the standing to enforce an agreement that Mendoza had signed with Speedy Cash. Ad Astra was an agent of Speedy Cash though, thereby making it a “related party” under to the agreement.

Second, Mendoza argued that his claim was not covered by the arbitration agreement, since he was not alleging monetary damage as a result of Ad Astra’s alleged violation of the TCPA. However, the arbitration agreement defined “Claim” under “the broadest possible meaning and includes … claims based on any … statute[.]” The agreement also specifically included claims arising out of debt collection activities.

Mendoza’s third argument stated that the arbitration clause was unconscionable. The court failed to agree though, pointing out that the contract, “gave plaintiff the unilateral right to reject arbitration at any time within 30 days of signing the contract.” Because Mendoza was given this chance to opt out of the arbitration agreement without affection the services he received from Speedy Cash, the court found that the arbitration agreement was enforceable under California law.
A similar class action lawsuit was filed in the Southern District of California wherein the plaintiff, David Sherman, had bought a used car from Rancho Chrysler Jeep Dodge in 2010. In 2013, Chrysler allegedly violated the TCPA by leaving a prerecorded message on Sherman’s voicemail, stating that it was the anniversary of his auto purchase and time for “another status review of your ownership experience.”

When he bought the car, Sherman signed a “Retail Installment Sales Contract” which included an arbitration clause. Like Speedy Cash’s arbitration agreement, Chrysler’s contract was very broad, covering “Any claim or dispute, whether in contract, tort, statute, or otherwise … shall at your or our election, be resolved by neutral, binding arbitration and not by a court action.”
Like Mendoza, Sherman also presented three arguments as to why his lawsuit should not be forced into arbitration. Sherman’s arguments included: 1) that there was no evidence that Sherman had read the arbitration clause, despite the fact that he had signed the contract, which specifically stated “YOU ACKNOWLEDGE THAT YOU HAVE READ BOTH SIDES OF THIS CONTRACT, INCLUDING THE ARBITRATION CLAUSE ON THE REVERSE SIDE, BEFORE SIGNING BELOW”; 2) that the arbitration clause is unconscionable; and 3) that the clause does not cover the dispute at issue.

Given the very broad terms covered under the arbitration agreement and the fact that Sherman signed the contract, the court rejected these arguments.

Our Chicago class action lawyers near Evanston and Wilmette bring class action, privacy law and individual consumer rights lawsuits. We bring suit for many types of class action lawsuits for consumer fraud issues and for unpaid overtime, junk fax, privacy rights violations, property damages due to pollution, false advertising and other claims. Super Lawyers has selected our Kane, DuPage and Cook County class action lawyers as among the top 5% in Illinois. Our Chicago class action attorneys only collect our fees if we win or settle your case. For a free consultation call us at our toll free number (877) 990-4990 or contact us on the web by clicking here.